Insurers in S.D. defy uncertainty in health coverage

South Dakota insurers are moving forward with preparations to sell health coverage again this fall at the federal exchange, despite uncertainty about whether the system of tax breaks attracting buyers to the program will stay.

“It’s hard to plan. We can’t do that when there’s a grenade going off in the middle of the table every time you turn around,” said Ruth Krystopolski, president of the Sanford Health Plan.

Last week’s surprise was a ruling from a court in Washington, D.C., that subsidies the government is using to reduce what consumers pay for health insurance in 36 states, including South Dakota, are illegal. A separate ruling the same day from a court in Virginia said the subsidies are valid. The issue could be on its way to the Supreme Court.

Carriers had a June 15 deadline to file their products for the coming sales period with the state Division of Insurance. They will learn by Aug. 10 whether the state approves those products. The three-month enrollment period begins Nov. 15 for consumers to buy coverage for 2015.

Sanford, Avera and Dakotacare, which sell the products eligible for the tax break, are proceeding as though the system will survive.

The subsidies are a central feature of the Affordable Care Act, the law Congress passed in 2010 with an eye toward making health insurance available at moderate prices to the entire population.

“If the subsidy is not there, the definition of affordable probably cannot be met,” Krystopolski said. “The entire thing unwinds without the subsidy.”

Kirk Zimmer, CEO at Dakotacare, said additional lawsuits are working their way through the courts over the legislation. Dakotacare is not altering its sales marketing approach and is not concerned at this point that consumers would access to the tax credits.

“We expect that there will be legal challenges to the decisions that will delay any definitive guidance,” Zimmer said.

About 13,000 South Dakotans used the federal exchange, including the healthcare.gov website, to buy coverage in the first enrollment last October until April. About 89 percent of them, or 11,600, qualified for discounts based on their level of income, according the Kaiser Family Foundation.

Those discounts, on average, knocked the price of insurance from $372 a month down to the $101 a month, a 73 percent savings, for consumers buying on the exchange.

“The subsidy is paid by the federal government to the insurer directly, and you pay the rest to the insurer,” said Chris Lee, a communications officer for Kaiser in Washington.

If consumers are unsure about the status of their subsidies, “I don’t blame them,” said Deb Muller, chief administrative officer for Avera insurance plans.

“Our point has been to tell consumers that their tax credits for 2014 are in place. Our expectation is that as we get closer to enrollment they will be in place again for 2015 while the courts make their decision,” Muller said. “Are people going to have to pay back the insurance company or the federal government? Right now that’s all very highly speculative. With these conflicting court rulings, we will have to watch.”

Congress passed the law specifically saying the subsides were for residents of states that set up their own changes. That group has 14 states. The other 36 exercised an option to pass on a state-run exchange and have the federal government run the marketplace for residents in those states instead. The Internal Revenue Service had said the subsidies would go to those states, too, but the D.C. court said no to that.

Muller said the Affordable Care Act passed with several provisos that the secretary of Health and Human Services would be issuing regulations to make the act function.

“If you read it, you keep coming up to the words, ‘The secretary shall.’ That means the administration would be writing the rules.”

Still, the law is functioning.

“People are out there using their benefits and accessing care, which is what we want them to do. Their tax credits are still in play,” Muller said.

By the numbers

People buying health insurance on federal exchange

13,104 in South Dakota

7,871,563 nationally in 36 states

Percentage of buyers eligible for tax credit

89 percent in S.D.

87 percent nationally

Average monthly premium before tax credit

$372 in South Dakota

$346 nationally

Average monthly tax credit

$271 in South Dakota

$264 nationally

Average net monthly payment

$101 in South Dakota

$82 nationally

Reduction because of tax credit

73 percent in S.D.

76 percent nationally

Source: U.S. Department of Health and Human Services. Kaiser Family Foundation. Note: Data as of April sign-up deadline. More enrollments have come in since because of changing circumstances in families.